Neoliberalism

A contested label

Today neoliberalism usually means the view that an economy should be run mainly through competitive markets, with a limited state and free movement of goods and capital between countries.

The word first meant something different. German economists of the Freiburg School used it between the wars for a new liberalism that rejected laissez-faire and wanted an active state to stop monopolies. Boas and Gans-Morse trace its shift to a mostly critical term to its use about Chile's reforms after 1973.

The word is contested. Boas and Gans-Morse found that most academic articles using it gave no definition, and that almost no one describes themselves as a neoliberal. The IMF economists Jonathan Ostry, Prakash Loungani and Davide Furceri likewise called it a label used more by critics than by the policies' architects. Many of the thinkers linked to it described their aim as reviving classical liberalism, the 19th-century belief in free markets and limited government.

What it was reacting to

The ideas grew in two waves. In the 1930s and 1940s, liberal thinkers saw their cause losing ground, and their main target was socialist central planning. In The Road to Serfdom (1944), Hayek argued that state intervention to redistribute wealth leads towards tyranny. Some historians trace the movement to the Walter Lippmann Colloquium of 1938. In 1947 Hayek gathered scholars at Mont Pelerin in Switzerland to discuss the future of classical liberalism.

The second wave came in the 1970s. Stagnation and rising public debt led economists to revive these ideas, partly against the Keynesian demand management that had guided policy since the war.